Capital expenditure for construction

Capital expenditure (sometimes abbreviated as Capex, CAPEX or CapEx) is one-off expenditure that results in the acquisition, construction or enhancement of significant fixed assets including land, buildings and equipment that will be of use or benefit for more than one financial year.

Whilst it is generally relatively straight forward to identify expenditure necessary to acquire or construct fixed assets, distinguishing between enhancements and expenditure such as repairs, maintenance, or replacement can be difficult. Very broadly, enhancements should either:

5 for maintenance and building operating costs during the lifetime of the building.

200 for the cost of operating the business during the lifetime of the building.

Ref. Report of the Royal Academy of Engineering on The long term costs of owning and using buildings (1998).

However, this has been criticised as misleading, not least because the construction industry accounts for around 7% of GDP, implying a much more significant proportion of business costs than the ratio suggests. Other ratios of construction costs to operational costs to business costs have suggested figures as low as 1:0.6:6 for some types of buildings. However, the usefulness of these ratios is questionable, other than if they are calculated based on actual figures for specific businesses.